Assume the time from acceptance to maturity on a $5,000,000 banker's acceptance is 90 days. Further assume that the importing bank's acceptance commission is 1.5 percent and that the market rate for 90-day B/As is 6.0 percent. Calculate the amount the exporter will receive if he discounts the B/A with the importer's bank.

Question

Quizplus · Accepted Answer

The first step is to calculate the importer's commission, which is 1.5% of the face value of the B/A:

Commission = 0.015 x $5,000,000 = $75,000

Next, we need to calculate the discount the exporter will receive if they choose to discount the B/A with the importer's bank. To do this, we need to find the discount rate. The formula for finding the discount rate is:

Discount rate = (Market rate x Time to maturity) + Commission
Discount rate = (0.06 x 90/360) + 0.015
Discount rate = 0.0165 or 1.65%

Now we can calculate the amount the exporter will receive:

Amount received = Face value - (Face value x Discount rate x Time to maturity)
Amount received = $5,000,000 - ($5,000,000 x 0.0165 x 90/360)
Amount received = $4,906,250

Therefore, the best choice is B, which is $4,906,250.

Assume the Time from Acceptance to Maturity on a $5,000,000